Favorable Ruling for Companies Defending Off-Label Promotion Cases

Most news involving the False Claims Act reports that a company paid large sums of money to the government and relators to settle allegations of off-label promotion. Not so in this post about a recent decision dismissing a relator’s complaint. Not only did the company win, for now, but the court made some helpful statements to support dismissal of other complaints with similarly defective allegations.

The relator, Laurie Simpson, worked for seven years at Bayer Corporation, during which tenure she helped market and promote Trasylol, a prescription drug approved by FDA for patients undergoing coronary artery bypass graft using a cardiopulmonary bypass pump to prevent excess bleeding. Simpson alleged that Bayer violated the False Claims Act by “engag[ing] in a campaign of concealment and disinformation concerning Trasylol’s safety and efficacy.” At the heart of Simpson’s Eighth Amendment of the 131-page Complaint containing 30 causes of action, is the allegation that Bayer promoted Trasylol for other types of surgeries and failed to provide safety and efficacy information about those other uses, resulting in the drug being misbranded under the Federal Food, Drug, and Cosmetic Act (“FDC Act”).

On April 11, 2014, the U.S. District Court for the District New Jersey ruled favorably on Bayer’s motion to dismiss the complaint. Bayer raised several bases for dismissal, but the focus of this post is Bayer’s argument that Simpson failed to adequately plead a false claim for payment, a critical element of an FCA violation. In the Third Circuit, and other jurisdictions, there are two categories of false claims: factually false claims (when the claimant misrepresents what goods or services are provided) or legally false claims (when there is a knowing false certification of compliance with a legal requirement on which payment is conditioned).

The allegations Simpson presented were that the claims were legally false because they were based on the alleged misbranding of Trayslol in violation of the FDC Act. To adequately plead a legally false claim, and survive dismissal, the relator had to establish that Bayer had made an implied certification that Trasylol complied with the FDC Act restriction against misbranding, and that such compliance with the FDC Act was a “condition of payment” from the government.

The court systematically reviewed each of the government programs that Bayer allegedly defrauded (e.g., Medicare, DOD, Tricare) to determine whether the government conditioned its payments for Trasylol on the limited on-label use of the drug. The court concluded that Simpson’s “bare legal conclusions” did not adequately plead the existence of a condition of payment and that the inference required by Simpson “would be speculative at best.” Thus, the court dismissed these counts, albeit without prejudice.

As part of its analysis, the court notably reminds of the purpose of the False Claims Act: “the False Claims Act was not designed for use as a blunt instrument to enforce compliance with all medical regulations—but rather only those regulations that are a precondition to payment.” This reminder may not do much to quell the tide of relators’ claims, but it provides continued support to industry in defending these actions.